OfBusiness Zinc Dailies

12th June’23

Price

• In the last trading day, LME zinc reached a peak of US$2,432/ton, and finally closed at $2,372.5/mt, down $40/mt, or 1.66%.
• The main zinc contract in Shanghai continued to rebound weakly, and the latest closed at 19865 yuan/mt, down 20 yuan/mt, or 0.1%. 84,274 lots were traded, 111,506 lots were held, and 835 lots were reduced.
• MCX Zinc, on Friday, settled down by -0.67% at Rs.214.25/kg.
• Most base metals prices fell on Monday, as traders and investors exercised caution ahead of the U.S. Federal Reserve’s rate decision and amid a firmer dollar. LME Zinc dropped 1.6% to $2,367/mt while SHFE zinc declined 0.7% to 19,745 yuan/mt.

Demand and Supply

• Chinese refined zinc output stood at 564,500 mt in May, an increase of 24,500 mt or 4.54% MoM and 9.56% YoY, slightly exceeding expectations.
• Research by Trafigura Research and industry estimates that annual demand for zinc will increase by 20% from current levels by 2030. Zinc will still have a deficit of more than 10% by 2030. A 10% shortfall is equivalent to 150% of Australia’s entire zinc mine supply, or 5 to 6 new “mega mines”.
• At present, the three smelters under Nyrstar are all in the stage of capacity increase.
• Due to high production costs and worker problems, Italy’s portovesme refinery may lose its primary zinc production capacity permanently.
• Germany’s Nordenham smelter still has concerns about long-term energy costs and has no plan to resume production.
• At present, natural gas consumption in Europe continues to be weak, and the inventory is relatively high.

News

• China will likely further cut banks’ reserve ratio and interest rates in the second half of this year to support the economy.
• China’s non-fossil fuel energy sources, such as wind and solar power, now exceed 50% of its total installed electricity generation capacity, Chinese state media reported.
• Chinese January-May vehicle sales were up 11.1% year-on-year, compared to a 12.2% drop in the same period last year, data from the China Association of Automobile Manufacturers showed.

OFB’s Opinion

• With the Fed’s interest rate decision looming, the market is treading carefully, and this is having an impact on zinc prices. Some short contracts have reduced their holdings and are adopting a wait-and-see approach. As a result, zinc prices have rebounded from their previous lows. Currently, MCX Zinc is receiving support at Rs.213.1, and if it falls below this level, it could test Rs.211.9. On the other hand, if it manages to break through the resistance level of Rs.216.4, we could see prices testing Rs.218.5.